Ofcom: BT must maintain wholesale and retail fibre broadband margin

Ofcom has proposed a significant market power requirement that will force BT to maintain a sufficient margin between its wholesale and retail super-fast broadband prices.

The media regulator has notified the European Commission of its decision to introduce the pricing rule, which is designed to promote competition and investment in the UK's fibre broadband market.

Ofcom, which has consulted on the matter, is looking to ensure BT's rivals can compete with the firm effectively by profitably matching its prices.

BT's position in the UK market is somewhat unique, since it operates as both a wholesale provider - which allows competitors to use its network - and a retail operator - which sells its own broadband packages.

The regulator's decision means BT will not be able to offer heavily discounted broadband deals, at a price-point economically unviable by firms paying BT for network access.

However, BT retains the flexibility to set its wholesale fibre prices - which is crucial in ensuring the firm continues to invest in its next-generation network.

In Ofcom's view, BT is currently maintaining a sufficient margin between its wholesale and retail prices, as required under the new draft rules.

So essentially, the proposed condition acts as an industry safeguard - one that limits BT’s ability to reduce retail margins in the future.

The new rules take into account the fact BT currently provides BT Sport free to its super-fast broadband customers, and the costs and revenues of these pay-TV channels.

It also considers the "other elements" - such as subscriber perks - which are included in BT's broadband packages.

"[The] draft decisions are aimed at ensuring that different operators can compete in the developing broadband market in years to come, so that consumers benefit from competitive prices, network investment and high-quality, innovative services," Ofcom stated.

The regulator noted that the measures are subject to European Commission approval, and following the body's review, a final statement is expected to be published in February 2015.

"The new regulatory condition would commence from the beginning of March and remain in place until March 2017, when the current regulatory review period ends," Ofcom explained.

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